P&D Routes

What You Need to Know About P&D FedEx Routes for Sale

Photo by Paul Hanaoka

Photo by Paul Hanaoka

Get the Skinny on Buying FedEx Ground Routes and FedEx Home Delivery Routes

If you are considering investing in a FedEx route for the first time we recommend starting with a pickup and delivery (P&D) FedEx business. A Fedex P&D route business is easy to learn and simple to operate.

The Structure of a FedEx P&D Route

FedEx P&D operations deliver to local homes and businesses in a designated territory, outlined in your Independent Contractor (IC) or Independent Service Provider (ISP) contract

There are two sides to the P&D coin: home delivery routes and ground routes. 

Historically, contractors could have either home delivery routes, grounds routes, or both.

Along with the FedEx transition to all ISPs, FedEx will require a contractor to operate both home delivery routes and ground routes within a given area by May 2020. 

The FedEx home delivery routes:

  • Primarily deliver to residential households.

  • Operate Tuesday through Saturday.

  • Have smaller to medium trucks and boxes.

  • Have high seasonal variability (with businesses often making a large part of annual revenue in the four weeks leading up to Christmas).

Ground routes are the other side of P&D routes.

FedEx ground routes feature:

  • Delivers primarily to commercial businesses.

  • Heavier packages and larger trucks.

  • Routes that run Monday through Friday.

  • Less seasonal variability than home delivery routes.

The Pros and Cons of a FedEx P&D Route

Pros:

  • Easier to hire drivers

  • Smaller trucks

  • Concentrated geographic territory

  • Lower risk than linehaul runs

  • Ability to increase business size and ramp up operations

Cons:

  • Lower gross profit than linehaul runs

  • You must own both ground routes and home delivery routes in your territory (this can also be a pro: overlap may be a pain, but it also increases the efficiency of the operation and can increase the profit)

  • Intense seasonal variability within home delivery routes

Are you the right investor for a FedEx P&D Route?

While the average investor in a FedEx route varies widely, we do notice a number of similarities among those who buy a FedEx route:

You might be the right investor to buy a Fedex route if you:

  • Have some type of business background

  • Previously owned or operated a company with employees

  • Have experience making payroll

  • Know how to manage customers and customer issues/concerns

  • Understand business financials and the basics of investment

  • Have a sense for how you will fund or finance a FedEx route investment

We’d love to talk with you more about FedEx P&D routes and how to evaluate the routes for sale. 
 

Buying a FedEx Route? Here's the Details on FedEx Bonuses

Photo by Adam Grabek

Photo by Adam Grabek

How does FedEx use bonuses to incentivize customer service and safety among contractors?

For Independent Service Providers (ISPs), Independent Contractors (ICs), and linehaul operations, FedEx offers bonuses to contractors that go above and beyond. 

Bonuses can add a substantial amount to your overall revenue each year. Whether you are an existing FedEx contractor or looking to buy a FedEx route, obtaining contractor bonuses should absolutely be part of your financial goals and strategies. 

ISP Bonuses

FedEx established an Independent Service Provider (ISP) model for all FedEx P&D routes and the transition to this ISP model will complete by May 2020. 

The ISP model incorporates two types of bonuses: Customer Service Incentives (CSI) and Period Safety Incentives (PSI). 

FedEx uses CSIs to incentivize above high quality service among contractors. All contractors receive CSIs on a regular schedule (based on a negotiated rate in their contract). The CSI bonus decreases in a given period if there were CSI complaints against that contractor. For example, late deliveries or customer complaints. 

PSIs recognize contractors that operate their routes without safety violations or incidents in a specific period of time. Similar to CSIs, contractors negotiate a rate for regular PSI payments. These payouts decrease for every safety violation within the payout period. Safety violations may include accidents with the FedEx truck, a delivery person injured on the job, or damage to a customer’s property. 

Both the CSI and PSI bonuses are ways in which FedEx influences contractor team behaviors without mandating behaviors. 

More about ISP bonuses:

  • CSIs and PSIs pay out every 4 weeks, or 13 times a year.

  • Contractors negotiate incentive rates with their contracts and these rates may change from year to year.

  • FedEx calculates incentives at 100% minus deductions. Deductions indicate CSI or PSI violations. If there are no deductions, a contractor will retain the full incentive. If there is one deduction, the percentage goes down an increment; with two deductions, another increment. So on and so forth.

IC Bonuses

The Independent Contractor (IC) model* also has a bonus structure: monthly and quarterly. 

Monthly bonuses award contractors $970 per ground Primary Service Area (PSA) and $600 per home delivery PSA. These are given 12 times a year.

Similar to ISP bonuses, the percentage of the incentive received goes down with every complaint, missed delivery, etc. 

Contractors receive quarterly bonuses four times per year and the amount is based on the number of PSAs in the contractor’s territory.

*Note: FedEx plans to transition all IC model businesses to ISP business by May 2020. 

Linehaul Bonuses

Linehaul contractors receive a monthly bonus 12 times per year. They receive a  $0.037 per mile bonus unless there is a safety or service incident. If there are a safety or service incidents, the bonus amount per mile decreases per incident. 

When we talked about big risks and big rewards in linehaul runs, these bonuses per mile are a large part of that puzzle. 

WHAT'S NEXT IF YOU WANT TO LEARN MORE?

If you need more help with the details and navigating contract negotiations, contact us for consulting.

We can walk you through pieces of the puzzle for buying a FedEx route, such as:

  • IC vs. ISP Business Models

  • Overlap Requirements

  • Understanding Contract Terms

  • Optimizing Operations

  • Fleet Management

  • Business Valuation

  • Terminal Relationship Management

  • Driver Recruitment/Training

And, as always, give us a call and we can help point you in the right direction. 

If you are interested in buying a FedEx route, check out our listing page for operations currently on the market.

Are drones a threat to FedEx ground routes?

Photo by Jason Blackeye

Photo by Jason Blackeye

Drones have been flying through the news for years: they’re going to be the fastest, most efficient way to deliver packages according to their endorsers. 

But is that really the case? And what does that mean for you as a FedEx contractor?

Drones are not an imminent threat. 

Not only is drone technology still in the fledgling stages, drones have a multitude of limitations that diminish their use.

For starters, present day drones can only carry single packages up to five pounds. While this may be helpful for quick purchases, any customer who orders two items is out of luck. And with a five-pound limit, how will anyone ever get their Chewy deliveries?

Further, at this stage in their development drones can only fly in daylight with low winds and good visibility. Drones cannot complete deliveries with no rain, snow, or ice in the air. Obviously, a solid fleet of trucks is capable of much more than present day drones. 

And finally, fully functional and versatile drones are far-off in development. The US government is reluctant to allow drones to operate in its airspace. Most drone tests are currently held in Europe. 

Have no fear about your current FedEx routes or buying a FedEx route. Drones won’t be swooping in to steal your business anytime soon. 

What's the Difference Between a Buying a FedEx P&D Route and a Linehaul Run?

Photo by Jake Blucker

Photo by Jake Blucker

Understand the Pros and Cons of FedEx Route Types and Find the Right Business for You

There are two distinct types of FedEx routes, and if you are considering buying a FedEx route, it’s important to figure out if you want to purchase pick-up and delivery (P&D) routes or a linehaul run.

There are important and significant difference between FedEx P&D routes and FedEx linehaul runs. 

What is a FedEx P&D route?

In our experience as contractors, pickup and delivery is a great place to enter the FedEx space for the first time. As a routine business, P&D is easy to learn and simple to operate.

P&D operations deliver to local homes and businesses in a designated territory. 

There are two sides to the P&D coin: home delivery routes and ground routes. Historically, contractors could have either home delivery routes, grounds routes, or both. Along with the FedEx transition to all Independent Service Providers (ISPs), FedEx will require a contractor to operate both home delivery routes and ground routes within a given area by May 2020. 

The P&D home delivery routes:

  • Primarily deliver to residential households.

  • Operate Tuesday through Saturday.

  • Have smaller to medium trucks and boxes.

  • Have high seasonal variability (with businesses often making a large part of annual revenue in the four weeks leading up to Christmas).

Ground routes are the other side of P&D routes.

Ground routes feature:

  • Deliveries primarily to commercial businesses.

  • Heavier packages and larger trucks.

  • Routes that run Monday through Friday.

  • Less seasonal variability than home delivery routes.

What is a FedEx linehaul run?

You can think of FedEx P&D routes as the box trucks you see out and about in your community. Conversely, you can think of the FedEx linehaul runs as the semi-trucks you see on the highway.

Linehaul runs feature:

  • Long distance transport, ranging from several hundred to several thousand miles.

  • Strenuous driver requirements, including a valid CDL license.

  • Semi-trucks: 18-wheelers that are expensive to buy and expensive to repair.

  • Varied types of linehaul runs, including solo, team, designated, and unassigned.

  • Known risks: semi-truck accidents in linehaul runs may result in significant injuries or fatalities.

What's the right FedEx business for you?

For many new contractors, it can be easier to begin with FedEx P&D routes and then level up to linehaul runs.

Linehaul is both a lucrative and risky business. Some contractors say linehaul runs are 90% boredom and 10% terror. But they can be an incredibly profitable investment for the right contractor. 

If you want to talk to contractors who run both P&D routes and linehaul runs about which type of FedEx business is right for you contact us and we are happy to help. 

Maybe you have a pretty good handle on all this, but an extra check wouldn't hurt? Download our free New Contractor Startup Checklist.

Check out our listing page for both P&D routes and linehaul runs currently on the market.